Oil prices drop as Ever Given is dislodged from Suez Canal

It’s been a mixed start to the week for global markets. After what was a very positive lead from Wall Street on Friday night, the major Asian stock indices are each moving at their own pace, while futures markets are pointing to a pop at the open for European shares, but a drop for US stocks. The AUD/USD has edged higher as yields have generally drifted lower, with other safe haven assets modesty outperforming their risk-sensitive counterparts, as traders take conservative positions.

US Futures drop

There’s been a few technical, and fairly left-field events that seems to have derailed market sentiment today. US Futures have dropped on the news that several block trades, selling some of the world’s biggest tech and media companies, are tied to margin calls for positions held by a high profile US hedge fund.

Japanese investment bank Nomura announces losses

The concerns surrounding those trades have seeped into Asian markets, after Japanese investment bank Nomura Holdings Inc (JP) announced it expects losses of potentially $US2b because of its exposure to the client.

Although the risks to broader financial markets from the dynamic are expected to be relatively modest and well contained, some fears of a contagion effect and market dislocations have been piqued, with focus firmly on how US markets react when they open tonight.

Elsewhere, the big-breaking news today has been reports that the much maligned Ever Given has been dislodged from the Suez Canal, possibly bringing to an end the blockage that had imperilled global supply chains, and led to heightened oil market volatility. Oil - Brent Crude have taken a spill off the back of the news, erasing early gains which had come off the back of news of an explosion of a major oil refinery in Indonesia.

As for the Australia 200 today, it gave up early gains as a result of the selling in US Futures, along with the announcement from the Queensland Government that it would be enforcing a 3-day snap lockdown in an effort to combat a growing COVID-19 cluster in the state.

The losses have been fairly broad-based, with only the materials and industrials sectors moving higher, in a sign that there’s a slight skew to cyclicals today. But every other sector has sustained relatively steep losses, with information technology and utilities stocks tumbling, in part as Australian bond yields creep higher, while the consumer discretionary sector has taken a tumble off the back Queensland’s announced lockdown.

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